MUMBAI: India’s current account surplus moderated to $15.5 billion or 2.4 per cent of the GDP in the July-September quarter of the current fiscal, the Reserve Bank of India (RBI) said on Wednesday.
The same was at $19.2 billion or 3.8 per cent of the GDP in the preceding three-month period on account of a rise in the merchandise trade deficit, the RBI said in a statement on ‘Developments in India’s balance of payments during the second quarter (July-September) of 2020-21’.
It is for the third consecutive quarter that India’s current account remained in surplus. In the last quarter of 2019-20, the surplus was $0.6 billion.
Current account deficit/surplus reflects the difference between the outflow and inflow of foreign exchange in a country’s current account.
A current account deficit of $7.6 billion or 1.1 per cent of the GDP was recorded in the second quarter of 2019-20.
India recorded a current account surplus of 3.1 per cent of the GDP in the first half of the fiscal as against a deficit of 1.6 per cent in the corresponding period of 2019-20. This was mainly on account of a sharp contraction in the trade deficit.
“The narrowing of the current account surplus in Q2 of 2020-21 was on account of a rise in the merchandise trade deficit to $14.8 billion from $10.8 billion in the preceding quarter,” the central bank said.
As per the RBI’s release, net services receipts increased both sequentially and on a year-on-year basis, primarily on the back of higher net earnings from computer services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, declined on a year-on-year basis but improved sequentially by 12 per cent to $20.4 billion in the July-September period of 2020-21.
Further, net foreign portfolio investment was $7 billion as compared to $2.5 billion in the second quarter of 2019-20, largely reflecting net purchases in the equity market.
With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of $4.1 billion in the second quarter as against an inflow of $3.1 billion a year ago.
Also, there was an accretion of $31.6 billion to the foreign exchange reserves (on a Balance of Payments or BoP basis) as compared to $5.1 billion in the second quarter of 2019-20.
Regarding BoP during April-September 2020-21, RBI said net invisible receipts were lower in first half of 2020-21, mainly due to decline in net private transfer receipts.
“Net FDI inflows at $23.8 billion in H1 of 2020-21 were higher than $21.3 billion in H1 of 2019-20,” it said, and added portfolio investment recorded a net inflow of $7.6 billion in H1 of 2020-21, almost at the same level as a year ago.
In first half of the current fiscal, there was an accretion of $51.4 billion to the foreign exchange reserves (on a BoP basis).
In another statement on India’s International Investment Position (IIP), RBI said net claims of non-residents on India declined by $4.6 billion during the quarter and stood at $339.1 billion at end-September 2020.
The decline in net claims was due to an increase of $53.4 billion in Indian residents’ overseas financial assets vis-a-vis a lower increase of $48.8 billion in foreign-owned assets in India.
Appreciation of the Indian rupee against the US dollar during the quarter contributed to the increase in India’s liabilities, when valued in US dollar terms.